NCBA says expense breach small

DENVER (DTN) – Leaders of the National Cattlemen’s Beef Association defended the group’s separation of checkoff and policy spending on Thursday, citing that an audit released earlier this week challenging the group’s firewalls found just $37,000 in questionable expenses out of approximately $115 million in total checkoff expenditures managed by the organization.

Despite several major outside issues such as the new proposed livestock marketing rule, the unresolved estate tax and challenges from animal-rights groups in various states, cattle producers at the NCBA and Cattlemen’s Beef Board joint summer meeting found themselves dealing instead with compliance audits and internal disputes over governance.

For more information on the audit, see “Audit questions NCBA expenses,” page A8.

The release of the Cattlemen’s Beef Board audit of NCBA, which NCBA stated found $37,000 in spending challenges in more than two years of records, has put a strain on the relationship between the two groups, said Scott George, a Wyoming dairy producer and chairman of the Federation of State Beef Councils.

“The relationship is strained at the moment, and I am really disappointed in that because we have done such good work over the last 14 years together,” George said.

NCBA leaders also said members of the group would not intentionally breach the firewall between the federation and policy divisions. Looking at details of the audit, it’s likely $20,000 will have to be shifted from policy to federation funds to cover undocumented or mislabeled expenses. Further, NCBA may have had more than 300,000 hours of employee time logged annually, and the audit questioned perhaps 20 to 30 hours of staff time, George said.

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“I would think that’s very relevant, because you need to get things back into perspective,” George said.

Steve Foglesong, an Illinois producer and president of NCBA, and other NCBA officers pointed out that NCBA has undergone several audits since the group has had the federation division. Foglesong said NCBA and CBB need to move beyond this issue as well.

“There was so much rhetoric going around to the point I think it was in the best interest of the industry to say ‘let’s back out of this,'” Foglesong said. “We’ve got other fish that need frying, and this is where we are absorbing all of our energy.”

In a written response to the audit, NCBA challenged the comment that NCBA had “breached the firewall,” as the independent CBB audit stated. “The accountant’s report does not support the conclusions CBB draws in its commentary.” NCBA added in its response that NCBA “provided more than adequate documentation, interviews and follow-up information” to resolve the “unable to determine” items listed in the report.

“The real issue here is lack of written and specific reimbursement guidelines to evaluate checkoff contractors for compliance,” NCBA said. “NCBA maintains the need for these detailed, written guidelines.”

NCBA leaders said they were also disappointed that there was not some discussion between CBB and NCBA over the release of the report. “We are also surprised CBB editorialized the final report by adding their own commentary,” NCBA stated. “This has never been done in our history with CBB and is a departure from standard accounting practices. And, again, we are disappointed they didn’t have the courtesy to review the commentary with us before distributing it broadly.”

Dan Dierschke, chairman of the Cattlemen’s Beef Board, said it was too premature to agree or disagree with NCBA’s response to the audit. Officers from both boards have met, but more work is needed to review the findings, examine the issues where the expenses could not be determined and get a better handle on the scope of the problem.

The checkoff is a $1-per-head fee paid when a producer sells cattle. The CBB receives 50 cents and individual beef councils in 45 states receive the other 50 cents. Each beef council then chooses to join and contribute to the Federation of State Beef Councils, run by NCBA, which is the largest recipient of checkoff programs. The more a state contributes to the federation, the more seats that state also has on the group.

Even before the audit was released on Monday, NCBA and CBB leaders were at odds over a proposed governance plan under which some layers of voting structure and separation between the federation and NCBA’s leadership would be removed. Following complaints from other groups and a negative response from USDA to the governance plan, CBB also weighed in, stating that perhaps the federation should be further separated from NCBA. That caused NCBA to put the governance plan on hold.

Dierschke said a tone was set when Secretary of Agriculture Tom Vilsack chose to oppose NCBA’s governance plan. As appointees of the secretary, Dierschke said the CBB backs his position that the federation needs greater independence from NCBA.

“There is a call in the countryside for greater independence and greater separation of the federation from many policy organizations, not necessarily from NCBA, but many other organizations,” Dierschke said.

The audit also gave ammunition to groups opposed to NCBA’s governance proposal. A letter written Wednesday from the American Farm Bureau Federation, Livestock Marketing Association, National Farmers Union, National Livestock Producers Association and US Cattlemen’s Association, addressed to NCBA stated that the five groups still have concerns “regarding the financial, operational, and governance firewalls” at NCBA that prevent the groups from supporting NCBA’s effort to restructure its governance.

George said a lot of groups have tried to decide how the federation should be run, so it’s important for those state beef council members to vote on what they want to do. George said there will likely be a vote on Friday by federation representatives, he said.

While the federation heads toward a vote, the CBB Executive Committee voted Thursday to propose an ad-hoc advisory group to discuss the structure of the federation and possible separation from NCBA that would draw from a variety of policy groups, including NCBA, American Farm Bureau, National Farmers Union. Livestock Marketing Association and U.S. Cattlmen’s Association, as well as other industry organizations.

“I would like to have the federation tell the world where they want to be and how they want to be organized,” he said.

Left in a stalemate because of the internal conflicts is the conversation about increasing the checkoff fee. That talk began in earnest three years ago because of the shrinking cattle herd and lost purchasing power of the dollar since the checkoff began in 1986.